Quarterly gross take-up picks up q-o-q

• Occupier demand from larger warehouse users has increased quarterly gross take-up in Q4 2023 (51,168 sqm). This figure is above the average quarterly gross take-up recorded over the last two years (47,704 sqm).
• There has been a lack of large occupier moves in the Adelaide market, with only four occupier moves in 2023 above 10,000 sqm. In Q4 2023, there were nine major occupier moves, with the largest being a 11,623 sqm pre-lease deal for Beaumont Tiles at Cnr Richmond Road & Morley Street, Adelaide Airport in the Inner West/East precinct.

Pre-lease demand falls

• Two assets added 10,200 sqm of new supply to Adelaide’s total stock in Q4 2023, which was a decrease in supply delivery compared to the previous quarter. However, demand for pre-lease deals have fallen, with only one out of the nine major occupier moves being a pre-lease deal.
• The largest completion of the quarter was a 5,990 sqm temperature-controlled facility for pre-lease occupier Clifford Hallam Healthcare. The project was developed by ESR Australia in Edinburgh, in the Outer North precinct.

Average prime net rents increase

• Average prime net face rents increased across the North West and Outer North precincts in Q4 2023, and incentives increased across all precincts except the Outer South precinct. The continuing trend with occupier demand outpacing supply is resulting in a rise of asking rents.
• Average land values increased again in Q4 2023 as demand from opportunistic owner-occupiers boosted demand for development sites. Average land values increased between 2.9% and 19.0% over the quarter.

Outlook: Rental growth to slow in the short to medium term

• As broader economic volatility relating to interest rates and inflation are expected to normalise in 2024, occupier demand is also expected to improve over the next 12 months. Despite this, speculative supply from developers is likely to remain low as construction material and labour costs remain elevated.
• Low supply is expected to support ongoing rental growth over the short term, albeit at a slower rate. The yield decompression cycle is expected to end and stabilise throughout 2024 when there is more certainty around broader economic conditions.